Morrisons edges ahead but is trailing rivals

Despite food inflation reaching levels that are worrying shoppers and politicians, Morrisons today reported a very modest lift in sales over Christmas.

In the six weeks to January 2, like-for-like sales at the fourth-biggest supermarkets chain were up just 1%.

This suggests that City suspicions the group is running out of steam could prove correct. Industry figures so far suggest that Sainsbury's will be the clear winner over Christmas, with Tesco and Asda also performing creditably.

Chief executive Dalton Philips said the sales indicated "another good performance in a tough market" as the company dealt with the "twin challenges of a difficult consumer environment and a prolonged spell of adverse weather".

Morrisons has done well in the last few years by focusing on fresh food. Those gains could now be under pressure, as rivals such as the Co-op up their game.

Kate Calvert at Seymour Pierce said: "We suspect Morrisons' performance will turn out to be the weakest of the majors, with Sainsbury's due to report on Wednesday and Tesco on Thursday."

Altium Securities remains a fan. A note reads: "Morrisons performed better than we had expected over Christmas, and there is no whingeing about the weather. We think that the business is well placed for long-term growth."

Morrisons is expected to make full-year profits of £860 million. The shares today fell back 0.3p to 270.2p.

Morrison's rival J Sainsbury today said it would create more than 20,000 jobs over the next three years as part of its store expansion programme.

The grocer, which is widely thought to have been the most successful of its peers at growing sales through Christmas, is opening 1.5 million square feet of selling space in its 2011-12 financial year, up from 1.25 million before, and will continue its expansion in the years beyond.